How To Do Effective Paid Marketing

November 25, 2013

Most entrepreneurs shy away from doing paid marketing because paid marketing is precisely that: paid. But just because you have to pay does not mean that this money will be senselessly risked and wasted. In this article I will explain how to take the risk out of your paid marketing efforts, and how to add paid marketing to your marketing arsenal to be used along side your free marketing efforts.
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Understanding Marketing Costs

The true marketing costs are not just the cost of placing a certain ad somewhere. The true marketing cost is the time it takes before a marketing technique begins to bring in clients. With many forms of free marketing like SEO, or anything else, it can take months. But with paid marketing, as long as you pay, you can get clients right away. And that decreases the wait time and the costs associated with not getting any clients. Take a look at our marketing costs tutorial.

Taking The Risk Out Of Paid Marketing

When you do paid marketing, it would be wrong to just blindly pay to get traffic. To take the risk out of paid marketing, you need to do two things. The first is that you must understand your customer lifetime value (LTV). That is the amount of profit that you can make per the lifetime duration of an average customer. Here is a tutorial on how to calculate the lifetime value of a customer.

The second thing you must do is to understand the customer acquisition cost to get a customer. So if you run a small paid marketing test, and your cost to acquire a customer is less than the lifetime value of that customer, you can increase your paid marketing spending because it brings in more money than you spend.

Test And Experiment With Your Sales Funnel

Once you understand your customer lifetime value, you can continuously run small experiments to see whether there is any way to do paid marketing that will amount to a lower customer acquisition cost than your customer lifetime value. There are two ways to do that. You can either go through different options for paid marketing, or try to optimize the conversion rate of your own site in order to improve your sales funnel.

My recommendation is to try to improve each step of your sales funnel as much as possible. Each improvement in your own site’s sales funnel will immediately result in you making more money. Once you get your site’s conversion rates to good levels, you can pay for paid marketing because your customer acquisition costs will be lowered by having optimized the conversion funnel to increase the chance of each visitor to become an actual paid customer.

To learn how to effectively optimize each step of your sales funnel, take a look at this video tutorial on AB testing.